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Investments in Unconsolidated Affiliates and Variable Interest Entities | 9 Months Ended
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Mar. 29, 2020
Equity Method Investments And Joint Ventures [Abstract] |
Investments in Unconsolidated Affiliates and Variable Interest Entities | 19. Investments in Unconsolidated Affiliates and Variable Interest Entities As of March 29, 2020, UNIFI maintained investments in three entities classified as unconsolidated affiliates: PAL; U.N.F. Industries, Ltd. (“UNF”); and UNF America LLC (“UNFA”). UNIFI’s investment in PAL was $56,641 and UNIFI’s combined investments in UNF and UNFA were $2,213, each of which is reflected within investments in unconsolidated affiliates in the accompanying condensed consolidated balance sheets. Parkdale America, LLC PAL is a limited liability company treated as a partnership for income tax reporting purposes. UNIFI has accounted for this investment using the equity method of accounting. PAL is subject to price risk related to anticipated fixed-price yarn sales. To protect the gross margin of these sales, PAL may enter into cotton futures to manage changes in raw material prices. The derivative instruments used are listed and traded on an exchange and are valued using quoted prices classified within Level 1 of the fair value hierarchy. As of March 29, 2020, PAL had no futures contracts designated as cash flow hedges. As of March 29, 2020, UNIFI owned a 34% interest in PAL (the “PAL Investment”) and Parkdale, Incorporated (“Parkdale”) owned the majority 66% interest. During March 2020, UNIFI commenced negotiations to sell the PAL Investment to Parkdale. Such negotiations indicated that the fair value of the PAL Investment was less than UNIFI’s carrying value and UNIFI no longer intended to hold the PAL Investment to allow recovery of the carrying value. UNIFI recorded an other-than-temporary impairment of $45,194 to adjust the PAL Investment to fair value. In April 2020, UNIFI and Parkdale finalized negotiations to sell UNIFI’s PAL Investment to Parkdale for $60,000. The March 29, 2020 adjusted carrying value, after recording the other-than-temporary impairment of the PAL Investment, was comprised of (i) $56,641 reflected in investments in unconsolidated affiliates and (ii) $3,359 of cumulative translation adjustments reflected in other comprehensive loss, totaling the $60,000 fair value. The transaction closed on April 29, 2020 and UNIFI received $60,000 in cash. The reconciliation between UNIFI’s share of the underlying equity of PAL and its investment is as follows:
Underlying equity as of March 29, 2020 |  | $ | 119,926 |
Initial excess capital contributions |  |  | 53,363 |
Impairment charge recorded by UNIFI in fiscal 2007 |  |  | (74,106 | )
Anti-trust lawsuit against PAL in which UNIFI did not participate |  |  | 2,652 |
Impairment charge recorded by UNIFI in fiscal 2020 |  |  | (45,194 | )
Investment as of March 29, 2020 |  | $ | 56,641 |
UNIFI evaluated the events relating to the PAL Investment under the guidance in ASC 205 – Presentation of Financial Statements. Disposition of the PAL Investment (i) did not represent a strategic shift for UNIFI and (ii) did not meet the criteria to be recorded as a discontinued operation. Accordingly, UNIFI continues to record the financial statement impacts of the PAL Investment in continuing operations. U.N.F. Industries, Ltd. Raw material and production services for UNF are provided by Nilit Ltd. under separate supply and services agreements. UNF’s fiscal year end is December 31, and it is a registered Israeli private company located in Migdal Ha-Emek, Israel. UNF America LLC Raw material and production services for UNFA are provided by Nilit America Inc. under separate supply and services agreements. UNFA’s fiscal year end is December 31, and it is a limited liability company treated as a partnership for income tax reporting purposes located in Ridgeway, Virginia. In conjunction with the formation of UNFA, UNIFI entered into a supply agreement with UNF and UNFA whereby UNIFI agreed to purchase all of its first quality nylon POY requirements for texturing (subject to certain exceptions) from either UNF or UNFA. The supply agreement has no stated minimum purchase quantities and pricing is negotiated every six months, based on market rates. As of March 29, 2020, UNIFI’s open purchase orders related to this supply agreement were $807. UNIFI’s raw material purchases under this supply agreement consist of the following:
|  | For the Nine Months Ended |
|  | March 29, 2020 |  |  | March 31, 2019 |
UNF |  | $ | 1,343 |  |  | $ | 1,478 |
UNFA |  |  | 13,219 |  |  |  | 17,199 |
Total |  | $ | 14,562 |  |  | $ | 18,677 |
As of March 29, 2020 and June 30, 2019, UNIFI had combined accounts payable due to UNF and UNFA of $2,724 and $1,728, respectively. UNIFI has determined that UNF and UNFA are variable interest entities and that UNIFI is the primary beneficiary of these entities, based on the terms of the supply agreement discussed above. As a result, these entities should be consolidated with UNIFI’s financial results. As UNIFI purchases substantially all of the output from the two entities, the two entities’ balance sheets constitute 3% or less of UNIFI’s current assets, total assets and total liabilities, and such balances are not expected to comprise a larger portion in the future, UNIFI has not included the accounts of UNF and UNFA in its consolidated financial statements. The financial results of UNF and UNFA are included in UNIFI’s consolidated financial statements with a one-month lag, using the equity method of accounting and with intercompany profits eliminated in accordance with UNIFI’s accounting policy. Other than the supply agreement discussed above, UNIFI does not provide any other commitments or guarantees related to either UNF or UNFA. Condensed balance sheet and income statement information for UNIFI’s unconsolidated affiliates (including reciprocal balances) is presented in the tables below. PAL was defined as significant and its information is separately disclosed. PAL has not met the criteria for segment reporting.
|  | As of March 29, 2020 |  |  | As of June 30, 2019 |
|  | PAL |  |  | Other |  |  | Total |  |  | PAL |  |  | Other |  |  | Total |
Current assets |  | $ | 258,113 |  |  | $ | 6,716 |  |  | $ | 264,829 |  |  | $ | 299,610 |  |  | $ | 7,218 |  |  | $ | 306,828 |
Non-current assets |  |  | 151,720 |  |  |  | 583 |  |  |  | 152,303 |  |  |  | 158,304 |  |  |  | 696 |  |  |  | 159,000 |
Current liabilities |  |  | 54,513 |  |  |  | 2,873 |  |  |  | 57,386 |  |  |  | 70,875 |  |  |  | 4,069 |  |  |  | 74,944 |
Non-current liabilities |  |  | 2,602 |  |  |  | — |  |  |  | 2,602 |  |  |  | 3,252 |  |  |  | — |  |  |  | 3,252 |
Shareholders’ equity and capital accounts |  |  | 352,718 |  |  |  | 4,426 |  |  |  | 357,144 |  |  |  | 383,787 |  |  |  | 3,845 |  |  |  | 387,632 |
UNIFI’s portion of undistributed earnings |  |  | 34,230 |  |  |  | 1,334 |  |  |  | 35,564 |  |  |  | 43,343 |  |  |  | 821 |  |  |  | 44,164 |
|  | For the Three Months Ended March 29, 2020 |  |  | For the Three Months Ended March 31, 2019 |
|  | PAL |  |  | Other |  |  | Total |  |  | PAL |  |  | Other |  |  | Total |
Net sales |  | $ | 170,854 |  |  | $ | 4,076 |  |  | $ | 174,930 |  |  | $ | 225,160 |  |  | $ | 6,217 |  |  | $ | 231,377 |
Gross profit |  |  | 12,182 |  |  |  | 392 |  |  |  | 12,574 |  |  |  | 8,638 |  |  |  | 1,149 |  |  |  | 9,787 |
Income from operations |  |  | 7,747 |  |  |  | 8 |  |  |  | 7,755 |  |  |  | 3,868 |  |  |  | 733 |  |  |  | 4,601 |
Net income |  |  | 9,811 |  |  |  | 74 |  |  |  | 9,885 |  |  |  | 4,142 |  |  |  | 740 |  |  |  | 4,882 |
Depreciation and amortization |  |  | 8,647 |  |  |  | 23 |  |  |  | 8,670 |  |  |  | 9,285 |  |  |  | 48 |  |  |  | 9,333 |
Cash received by PAL under cotton rebate program |  |  | 3,210 |  |  |  | — |  |  |  | 3,210 |  |  |  | 3,053 |  |  |  | — |  |  |  | 3,053 |
Earnings recognized by PAL for cotton rebate program |  |  | 3,215 |  |  |  | — |  |  |  | 3,215 |  |  |  | 3,195 |  |  |  | — |  |  |  | 3,195 |
Distributions received |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 750 |  |  |  | 750 |
|  | For the Nine Months Ended March 29, 2020 |  |  | For the Nine Months Ended March 31, 2019 |
|  | PAL |  |  | Other |  |  | Total |  |  | PAL |  |  | Other |  |  | Total |
Net sales |  | $ | 531,669 |  |  | $ | 14,212 |  |  | $ | 545,881 |  |  | $ | 626,812 |  |  | $ | 19,256 |  |  | $ | 646,068 |
Gross profit |  |  | 13,067 |  |  |  | 1,745 |  |  |  | 14,812 |  |  |  | 18,841 |  |  |  | 3,587 |  |  |  | 22,428 |
(Loss) income from operations |  |  | (554 | ) |  |  | 497 |  |  |  | (57 | ) |  |  | 5,663 |  |  |  | 2,284 |  |  |  | 7,947 |
Net income |  |  | 3,893 |  |  |  | 581 |  |  |  | 4,474 |  |  |  | 6,334 |  |  |  | 2,381 |  |  |  | 8,715 |
Depreciation and amortization |  |  | 30,671 |  |  |  | 113 |  |  |  | 30,784 |  |  |  | 30,576 |  |  |  | 143 |  |  |  | 30,719 |
Cash received by PAL under cotton rebate program |  |  | 10,366 |  |  |  | — |  |  |  | 10,366 |  |  |  | 8,773 |  |  |  | — |  |  |  | 8,773 |
Earnings recognized by PAL for cotton rebate program |  |  | 9,569 |  |  |  | — |  |  |  | 9,569 |  |  |  | 9,444 |  |  |  | — |  |  |  | 9,444 |
Distributions received |  |  | 10,437 |  |  |  | — |  |  |  | 10,437 |  |  |  | 130 |  |  |  | 1,250 |  |  |  | 1,380 |

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- Definition The entire disclosure for equity method investments and joint ventures. Equity method investments are investments that give the investor the ability to exercise significant influence over the operating and financial policies of an investee. Joint ventures are entities owned and operated by a small group of businesses as a separate and specific business or project for the mutual benefit of the members of the group. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 810 -SubTopic 10 -Section S99 -Paragraph 4 -Subparagraph (SX 210.3A-04) -URI http://asc.fasb.org/extlink&oid=116822174&loc=d3e355119-122828 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 323 -URI http://asc.fasb.org/topic&trid=2196965 + Details
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